Online Pricing Insights: The Music Edition
February 11, 2010
I enjoyed reading “iTunes Price Increases Mean Slower Sales for Music Labels.” I can hear the azure chip consultants saying, “We were surprised.” Right. The core of the story is that higher prices on Apple iTunes’ music reduced sales. Got it. For me, the most telling statements in the write up were:
- “Warner Music Group revealed Tuesday that it has seen digital music sales slow down since the price increase took effect in April 2009.”
- “Warner CEO Edgar Bronfman Jr. reportedly said the pricing change has been a “net positive” for Warner, but conceded that a 30 percent price increase during a recession was not the best move.”
- “Publishers have said the increased prices will not lead to greater profits, but will protect the viability of the book marketplace by giving authors and agents the ability to make more money on every digital sale.”
Net net. Raising prices reduces sales. Get your Number 2 pencils out. Based on the data in the article, calculate the price point at which publishers generate a pre tax profit of 20 percent. I know Steve Jobs will get this problem right.
Stephen E Arnold, February 11, 2010
No one paid me to write this article or create a test question. I will report this failure to get paid for an academic exercise to the Department of Education.
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